GBP/USD remains weak below 1.3350 amid omicron concerns and Brexit concerns

GBP/USD is trading moderately below 1.3350, consolidating from its 11-month low of 1.3278, with risk sentiment improving slightly. Despite the risk reset, the risk remains downward biased against the majors as they continue to face the latest Omicron covid and ongoing Brexit issues.

Risk sentiment took a hit in early Asia, and concerns over the latest covid variant shook the market, propelling the overall rebound of the US dollar. South Africa’s recent surge in COVID-19 cases, which appears to have been triggered by a new strain, is urging countries around the world to impose new restrictions. However, Dror Mezorah, head of the coronavirus department at Hadassah University Hospital in Ein Karem, said the clinical status of people infected with Omicron is encouraging.

Despite risk recovery, sentiment around the pound can remain compromised by ongoing Brexit concerns. Vice-President of the European Commission, Margaritis Schinas, said Britain needed to resolve the post-Brexit immigration issue on Saturday.

Meanwhile, French President Emmanuel Macron attacked British Prime Minister Boris Johnson in a letter tweeted Friday and accused him of being “not serious.” This is in light of the ongoing tensions surrounding the Franco-British fishery. We will continue to lead the update of Omicron Covid variants and their impact on risk sentiment on Monday’s UK and US economic calendars.  Investors are trying to reassess the Bank of England’s (BOE) rate hike expectations in light of recent Covid claims. This could be a further downside to the UK currency.

The dollar was up on Monday morning in Asia, with investors slowly regaining their risk appetite after the discovery of the omicron COVID-19 variant. However, caution remained as research continues on this new strain.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.19% to 96.290 by 10:52 PM ET (3:52 AM GMT), after falling to a one-week low of 95.973 on Friday. Although the safe-haven U.S. currency is poised to benefit from the uncertainty, the outlook for when the U.S. Federal Reserve and other key central banks will hike interest rates is now uncertain.